- Last year was a tough year for the crypto market with the collapse of FTX, Celsius, and Three Arrows Capital.
- “Centralized lending and revenue products are going the same way as the Dodo,” said one executive.
- Experts shared their outlook for 2023 and explained how things could get worse before they get better.
The cryptocurrency market took a big hit in 2022. It's the downfall of industry giants like digital asset exchange FTX, algorithmic stablecoin TerraUSD, and now-defunct hedge fund Three Arrows Capital.
The industry's market capitalization is down more than 65% from its all-time high in November 2021, and Bitcoin and Ethereum are down more than 60% since the beginning of the year, according to Messari data.
Many are asking themselves: Could it get any worse?
For context, the sector experienced an 18-month bear market from 2018 to 2019, dubbed the “crypto winter.”
“Contagion will take a long time to fully unfold, so we still expect some dominoes to fall in 2023. That said, there are better and more reliable solutions in this space. “We're already seeing renewed efforts to build new assets, and we expect that trend to increase further.” will be a central theme in 2023, said Phil Wirtjes, head of strategy at digital asset trading platform Enclave Markets. told Insider.
What shoes will be released next this year?
everyone is paying attention digital currency group, It is a conglomerate that oversees powerful companies such as asset management company Grayscale and crypto brokerage company Genesis.
Genesis has come under fire after its lending arm suspended withdrawals in November. The company had exposure to Sam Bankman Freed's failed exchange. $175 million I'm stuck with the FTX trading platform. Genesis said that after FTX filed for bankruptcy, customers rushed to withdraw their funds, creating a severe liquidity shortage.
Andrei Grachev, managing partner at the digital asset market maker, said: “Genesis' impending downfall is unlikely as the majority of Genesis' assets are owned by US hedge funds and the market has already adapted to this news. “This has been a concern for some time.” DWF Labs told his Insider.
He added: “While this bankruptcy may not have a major impact on the industry as a whole, it does mark the end of an era, with DCG finally succumbing to what has long been feared to be the last domino to fall.” Ta.
Genesis will cut 30% of its workforce on Thursday, with its sales and business development teams being the hardest hit by the job cuts, a company spokesperson told Insider. Gemini, a cryptocurrency exchange that lent money to Genesis for interest-bearing products, is trying to recover $900 million in customer funds from the embattled company.
There is a possibility Massive losses and liquidations occur across the industry If a large company like Genesis or its parent company DCG files for bankruptcy.
“The lawsuits and bankruptcies will continue for years. Even now, the coins from Mt. one Teagan Klein told Insider. “The biggest outstanding situation right now is the situation with DCG, Genesis and Grayscale, and we're waiting to see what happens there.”
FTX infection can cause Bankruptcies and lawsuits will increase again this year.
Fedor Muegge, a partner at blockchain venture firm 369 Capital, told Insider that the industry has yet to see the full implosion of FTX, Terra and Luna play out.
“We have not even begun to truly unravel FTX and its corporate network. Further work on this matter and investigations in other recent cases, such as the Terra case, could lead to further litigation.” said Muegge.
“Additionally, this prolonged bear market will deplete liquidity for many small businesses, ultimately leading to further bankruptcies,” he added.
Youwei Yang, chief economist at cryptocurrency mining company BTCM, said, “If there is a big shock in the market, cryptocurrencies will become even cheaper than they were with Luna/UST/3AC and FTX, with Bitcoin reaching $12,000 to $13,000. “Ether could go for $800 to $900.” Insiders cite a tough macro environment, a restrictive regulatory environment, or the possibility of his DCG going bankrupt.
You can count on me withdrawal of double-digit interest yields offered by centralized companies; Because if there's anything we've learned from crypto in 2022, it's that if it sounds too good to be true, it probably is.
Centralized lender Celsius offered its customers nearly 20% annual deposit yields. The company later filed for bankruptcy following a liquidity crisis in July.
“Centralized lending and high-margin products are going the way of the dodo,” said Teagan Klein, chief financial officer and co-founder of software developer Edge & Node. told Insider. “Especially in DeFi, he can earn attractive returns using the Web3 protocol and dapps.”
As a result, investors may turn to decentralized finance, DeFi protocols such as Aave or Compound, or decentralized exchanges such as Uniswap.
“There are many protocols that offer benefits from staking to network protection, such as Ethereum and DeFi protocols, which have successfully weathered the crypto lending crisis,” Klein added.